Study On The Relation Between Agent Cost And Executive Compensation Incentives

Principal-agent theory, asymmetric information and inconsisten of the client and agent objective function t lead to the existence of the agency cost. Effective compensation contract designed is advantageous in encouraging agents to choose and implement activities which can increase the wealth of the client. In recent years, how carries on the effective incentive to the senior management of listed companies in China is becoming the focus of controversy in the practical and the theoretical circle. Carrying on managerial annual salary system or equity incentive system, the aim is to encourage managers, and enable to increase the correlation between the level of manager effort and enterprise performance, to decrease agent costs between the client and the agent. However, whether the implementation of the incentive mechanism plays its proper effect, and what is the relevant counter between the agent cost and the executive compensation motivation? These are the questions we are attempting to answer by empirical analysis in this paper. In this paper, 54 listed companies in Shenzhen from year 2004 to 2006 are used as samples to do relevant counter research on the agency cost and he executive compensation motivation to find, the relations between the two and some proposals on improving the executive compensation motivation and controlling agency cost are also explored. The article is divided into six parts:Chapter 1 is the "Introduction". Thesis background ,theoretical and practical meanings of this thesis, domestic and international current situations of study on relevent problem to it, train of thoughts ,mehtod of the study and the innovations in this thesis are simply introduced in this section.Chapter 2 is "Summary of the theory" is the theoretical basis of the article. First, we interprete the concept of agent costs, executive and compensation and introduce the manners of executive compensation incentives. Then we briefly reviewe the theories associated with the executive compensation incentives.Chapter 3 is "Development of executive compensation incentives in China's listed companies and current situations ".We first introduce the three evolutionary process of the executives compensation system, and then analyze current situation of executive compensation incentives in China's listed companies and existing problems.Chapter 4 is "the Positive research about the relativity of agent cost and executive compensation incentives". 54 listed companies in Shenzhen from year 2004 to 2006 are used as samples . Using the frontier analysis model and agent cost regression models, and SPSS software, we study on the relativity of agent cost and executive compensation incentives.Chapter 5 is "Study on the Countermeasures to optimize the executive compensation motivation system and control the agent cost". We propose some policies and suggestions to optimize executive compensation incentives in the China's Listed Companies and control agent cost.Chapter 6 is the "Tag" .We confirm the primary contents of the test ,and analyze the linitatons and the direction of the future research.